One day after a unity deal between rival Palestinian factions, the State Department said roughly $400 million in annual U.S. funding would be reassessed as the policies of the new leadership emerge.

“The current Palestinian government remains in place and our assistance programs continue,” State Department spokeswoman Heide Bronke-Fulton said in an email.

“If a new Palestinian government is formed, we will assess it based on its policies at that time and will determine the implications for our assistance based on U.S. law.”

U.S. lawmakers from both parties have warned that the reconciliation deal between the western-backed Fatah party and the Islamist Hamas could imperil U.S. aid if Hamas continues to spurn demands that it renounce violence and recognize Israel’s right to exist.

The top Republican and Democrat lawmakers on a House of Representatives appropriations subcommittee wrote a letter to Palestinian President Mahmoud Abbas on Thursday urging him to reconsider the Hamas deal and to stop moves to seek U.N. recognition of a Palestinian state.

“Our ability to support current and future aid would be severely threatened if you abandon direct negotiations with Israel and continue with your current efforts,” Republican chairwoman Kay Granger and senior Democrat Nita Lowey said.

“Your current courses of action undermine the purposes and threaten the provision of United States assistance and support.”

The Palestinian deal comes as Israeli Prime Minister Benjamin Netanyahu prepares to visit Washington next month and U.S. officials weigh the chances of restarting direct peace talks which collapsed shortly after their launch last year.

“U.S. taxpayer funds should not and must not be used to support those who threaten U.S. security, our interests and our vital ally, Israel,” Ileana Ros-Lehtinen, the Republican chair of the House Foreign Affairs Committee and a staunch defender of Israel, said in a statement.

The Obama administration has reacted coolly to the Hamas-Fatah announcement. It insists that any future Palestinian government must renounce violence, respect past peace agreements and recognize Israel’s right to exist.

Hamas, founded on a charter that calls for Israel’s destruction, appeared unlikely to comply with these demands. Hamas has been in control of the Gaza Strip since 2007 and it remains unclear exactly what role it might play in a unity arrangement with President Mahmoud Abbas’ Fatah that governs the West Bank.

BUILDING INSTITUTIONS

Since 1994, the United States has given more than $3.5 billion to the Palestinian Authority now headed by Prime Minister Salam Fayyad, much of it aimed at strengthening governance and security in preparation for eventual statehood.

“Our current support for the Palestinian Authority, as led by President Abbas and Prime Minister Fayyad, serves as an important contribution to U.S. efforts to support the building of Palestinian institutions,” Bronke-Fulton said.

But with many details of the Palestinian agreement not known, it was unclear if this would continue.

A Congressional Research Service report last year said a potential unity government could drop the development and reform objectives set by the Fayyad administration, which are used as major justifications for current U.S. aid levels.

It also said that as long as Hamas refuses to agree to the basic benchmarks on renouncing violence and accepting Israel, the United States could not legally continue assistance to any government of which it is a part.

Palestinian suggestions that the new interim government would be made up of technocrats without party affiliation may allow some legal room to maneuver, but Israel’s vocal allies in the U.S. Congress were unlikely to be appeased.

“The Palestinian Authority has chosen an alliance with violence and extremism over the democratic values that Israel represents,” a bipartisan group of U.S. lawmakers said on Thursday after a meeting in Tel Aviv with Netanyahu.

The questions over Palestinian aid come amid a broader debate over U.S. foreign aid levels, which many Republicans have vowed to cut to help rein in the U.S. budget deficit. (Additional reporting by Susan Cornwell; Editing by Doina Chiacu)